changing approach to aggregation concept

UHBDPУкраїнський проект бізнес-розвитку плодоовочівництва

What Client Experience?

Aggregation: Trading and Business Development

Direction Forward Sergii Potapov , Ukraine

Value Chain Developer | UHBDP

17 April 2016

UHBDP Client Experience

UHBDP Clients

• Audience: Who are we speaking to?

• What do we want them to do?

– What change are we asking them to

do?

– Why is the change important?

• What do they need to know?

• How do we need to interact with

them?

– What information to share?

– What activities to perform?

2

Lead Firm Out-Grower /

Off-Taker Supply Chain

Rationale

- Offers access to profitable market opportunities for

small farmers

- Business success for Lead Firms depends on

establishing a predictable, consistent, and quality

supply of agriculture commodities grown by small

farmers

- Business prospects and success are

interdependent:

- The more successful the Lead Firm, the greater its

capacity to support and buy from its Out-Growers;

- Increasing Out-Grower capacities expands the

business opportunity for the Lead Firm

- Out-Grower Supply Chain creates competitive

advantage for the participants in relation to current

alternative

- Alternative: opportunistic, spot trading between small

farmers and traders/buyers based solely on price

Lead

Farmer

Lead

Farmer

End Customers

Small Farmers

allied to

Lead Farmer

Small Farmers

allied to

Lead Farmer

Lead

Firm

Embedded

“Sales

Agent”

(Organizer)

W 2

W 1

W 3

W 5

W 4

Aggregation across Trading

Embedded “Sales Agent”(Organizer)

Dynamic personalized trade, direct communication with the customer, rapid price control

W 4W 1

W 3 W 5W 2

logistics batch, involved in the supply chain

Real process of the people, involved in the supply chain

Real process of the price, involved in the supply chain

W 2

W 1

W 3

W 5

W 4W 4W 1

W 3 W 5W 2

logistics batch, involved in the supply chain

Price 5

Price 4

Price 3

Price 2

Price 1

qu

alit

y 1

qu

alit

y 3

qu

alit

y 2

qu

alit

y 4

qu

alit

y 5

Spe

c 1

Spec

2

Spe

c 4

Spec

3

Spe

c 5

pays the price correspondingto the goods

X

Price ?

purchase amount

Ø Spec Σ

*Spec= specification

Ø Quality Σ !

Price to the final consumer

≠ Ø Price ΣNo concept of "raw" . Product "at the input" is equal Product «to the output!» UHBDP

«Aggregation across Trading»

*Spec= specificationLife example


ALL

SA

LES

CH

AN

NEL

S


+ B

UHBDP

«B for Business»

• MEDA anticipates that small farmers

assisted by UHBDP will have collectively

expanded their horticulture sales to

50,000 metric tons valued

at $ 40 million annually

by the end of the Project.

!

~W 1 ~W 1

~W 1 ~W 1

Aggregation across Business Development

~W 1*Spec= specification for RAW

~W 1 ~W 1

~W 1

~W 1

~W 1 Business Development

~W 1 ~W 1

~W 1 ~W 1

~W 1 ~W 1

~W 1 ~W 1

~W 1 ~W 1

~W 1 ~W 1

~W 1 ~W 1

~W 1 ~W 1

transformation process

W1 W1

W1 W1

W1 W1

W1 W1

W1 W1

W1 W1

W1 W1

W1 W1W2 W2

W2 W2

W2 W2

W2 W2

W3

W3

W3

W3

Aggregation RAW at RAW Spec

Pro

du

ctio

n

full

un

der

stan

din

go

f sa

les

chan

nel

s an

d t

hei

r n

eed

s

Grade 1, Q1, Price 1




Grade 1, Q1, Price 1open air markets

processing


Mar

ket

Dev

elo

pm

ent

Aggregation across Business Development (Price Side)

~W 1

~W 1

~W 1

~W 1

W1 W1

W1 W1

W1 W1

W1 W1

W1 W1

W1 W1

W1 W1

W1 W1

W2 W2

W2 W2

W2 W2

W2 W2



W3

W3

W3

W3


open air markets

processing

~W 1

~W 1

Pro

du

ctio

n

~W 1

~W 1

~W 1

~W 1

~W 1

~W 1

~W 1

~W 1

~W 1

~W 1

~W 1

~W 1

~W 1

~W 1

~W 1

~W 1

Specification for RAW

Tough price for raw material

specification

Fixed-price Zone, include the costs of production, it depends entirely on the specification for Grade

Free Price Zone,for any quality has its own customer

The buyer is fully knows what the quality of product he gets behind own money …

…can plan production

…what the price will be fixed at the price tag for fixed quality

Background for fresh F&VMarket Development

aggregate volume

UHBDP

• MEDA anticipates that small farmers assisted by UHBDP will have collectively expanded their horticulture sales to 50,000 metric tons valued at $ 40 million annually by the end of the Project.

• MEDA aims to establish 10,000-15,000 small private farmers in clusters and, in total, achieve 50,000 metric tons of consolidated horticulture sales of valued at $40 million annual by the end of UHBDP. The Project will benefit a total of 30,000 small private farmers with other services.

One of the Project objectives. A significant role VCD in this task.

«Working with Smallholders. A Handbook for Firms Building. Sustainable Supply Chains.» IFC, July 2013 UHBDP

https://drive.google.com/file/d/0BxUvFTKR1h8-WWlxUVB0LWtrbzQ/view

• Aggregation - merging of equal set of parameters (type, grade, size, dry matter content, degree of maturity and etc.) production of raw materials to the products of farmers level, which later receives the added value chain and moves to the end consumer ( e.g rice, cotton, coffee, cashew nuts, palm oil, more ...).

• For horticultural sector, it is important to have a source (farmer leader, cooperative, trade company, etc.), which forms the specification for cultivation and subsequent aggregation of raw material (fresh fruits and vegetables & other horticultural products).

• It is crucial to create an array of businesses, that will be involved in its work SME`s, who can provide these activity with raw materials for Aggregation.

Not a single the company, which was involved in the process, should not be the LOST !!!

UHBDP

Responsible: • VCD specialist • Field Team ( recipients comp)Key Factors:• Real farming or trade business in F&V• SME`s have a Management Team• Firm capability

UHBDP Matching Grant, offered Logical Process scheme for Applicants:Source: Matching Grant Guidelines & Lesson Learn from VCD side

SME`s from horticulture

business

Normal annual cycle for own

farm ore trade

Do your have a

Business Plan?

Signed memorandum about cooperation with UHBDP

GO!Business Plan

implementation!

NoEnough ownfinance

recourses?

Decision: • In this case SME`s only

with own working capital have possibilities for own development

• UHBDP provide for SME`s another service (education, training, etc.)

• UHBDP help for him make first step

• Revenue from this client can be added to UHBDP reference points

Field visit with full assessment situation. Rough values of

Turnover & Budget BP

Clear determinate of needed investment size for

BP, involved equipment suppliers & building

company ( full Budget process)

Yes

Matching Grants Program (MPG):InvestmentCompetitiveAwards

yes

No

SME`s clear determinate of needed investment size for

rough BP

SME`s clear determinate of own finance capital available

for this BP

Formalization 1 stage Business Plan – make a Concept Note

Fundable Concept Note in

principle?

Receive & Evaluate

Concept Notes

No

Finance Diligence

Receive clear for ANY investors finance figure: P&L, Cash Flow ,EBITDA,

GM, CM, Net Rev, IRR, etc.

Pro

po

sal d

irec

tio

n f

or

sea

rch

fin

ance

su

pp

ort

MGP

Private Loan

Bank Loan

Internal & external investors

Foreign Project

Foreign Support

Programs

VCD zone Finance zone

Investment Competitive Awards

Ass

ets

Mo

ne

y

1:2; 1:3~50-200 k USD

1:1~10-50 k USD ~less 10 k USD

Yes

CLEARE DETERMINATE MATCHOWN INVEST : FIN SUPPORT

Determinate & make full description of mutual obligations & milestones for

Business Plan Development

Enough own

finance recourses?

Final Due Diligence

Yes

No

Preparation & description of money transaction procedures ( reimbursement

principle, stage in time, etc.)

TAX ANALIZE !!!

Contract Signed

Determinate type of Awards

UH

BD

P

Re

cip

ien

ts

Legal & Accounting specialist zone

Develop fullBusiness Plan

X

Documents, that generate information about Trade Turnover (client side)

Signed memorandum about cooperation with UHBDP

Formalization 1 stage Business Plan – make a

Concept Note

Receive clear for ANY investors finance figure: P&L,

Cash Flow ,EBITDA,GM, CM, Net Rev, IRR, etc.

Determinate & make full description of mutual

obligations & milestones for Business Plan Development

VC

D z

on

eFi

nan

ce z

on

eLe

gal &

Acc

ou

nti

ng

spe

cial

ist

zo

ne

level verification

LOW 50%, 60% info

Medium 65%, 30% info

HI! 100%, 10% info

Name doc Quantity/forecastTurnover now

MT/ USDTurnover FC

MT/ USD

Memo

Concept Note

Business Plan

Fin Model

Agreement

Contract

Priority areas to provide their own (UHBDP) Matching Grants.

#1

Lead Farmer

#3

Products for export

#2

Niche & experimental crops with high added value

14

Thank you!!!